In Chess Match for 21st Century Fox, More Moves to Come

By

Nicholas Jasinski

June 27, 2018 6:02 p.m. ET

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We learned today that the bidding war between Walt Disney (DIS) and Comcast (CMCSA) over 21st Century Fox’s (FOXA) entertainment assets is likely far from over, but the stocks ended the day relatively calm given the news: Disney lost 0.3%, Comcast fell 1.5%, and Fox gained 2.4%.

Investors found out that Comcast is reportedly searching for additional buying power and the Department of Justice weighed in on the antitrust implications of a combined Disney/21st Century Fox.

It’s the latest chapter in a story that began in December, when Disney bid $52 billion in stock for 21st Century Fox’s movie studios, a stake in the streaming service Hulu, cable TV channels such as FX, and international TV properties.

Comcast raised its bid to $65 billion cash in early June, then Disney countered with a $71 billion cash and stock offer last week. 21st Century Fox shares have increased 49.0% since the first Disney bid was announced on Dec. 13, while Disney’s have fallen 3.1%. Comcast has gained 3.6% since it got involved on June 13. (21st Century Fox and Barron’s parent company, News Corp, share common ownership.)

In addition to receiving a larger amount, accepting Disney’s current offer would allow 21st Century Fox to avoid an AT&T/Time Warner-like antitrust battle: On Wednesday, Fox announced that the Justice Department wouldn’t sue to block the acquisition as long as ESPN-owner Disney agreed to divest Fox’s 22 regional sports networks, including YES. (Let the next bidding war begin.) MoffettNathanson estimates the regional sports networks to be worth $18.6 billion.

Charles Mostoller/Bloomberg

A Comcast acquisition would likely face difficulty and delays as both a vertical and horizontal merger. Comcast’s 2011 purchase of NBCUniversal (which included 30% of Hulu) was approved only after it agreed to conditions that limited its ability to leverage its control over content with competing distributors. Those restrictions are set to expire in August.

This hasn’t stopped Comcast from seeking a potential strategic bidding partner for the media assets, according to The Wall Street Journal on Wednesday. Possible candidates could include private equity, tech companies, or other traditional media firms who might be interested in taking on just a portion of the acquired assets. This approach would allow Comcast to raise its bid even higher without losing its investment-grade credit rating and could ease regulatory scrutiny depending on which assets a partner takes on.

Fox originally planned to vote on a deal at a July 10 shareholder meeting, but postponed it after Disney’s last offer, giving Comcast more time for another bid. Stay tuned.

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In Chess Match for 21st Century Fox, More Moves to Come

We learned today that the bidding war between Walt Disney (DIS) and Comcast (CMCSA) over 21st Century Fox’s (FOXA) entertainment assets is likely far from over, but the stocks ended the day relatively calm given the news: Disney lost 0.

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